In joint collaboration with NIES GESL Group 27, Building Blocks.

Economics Lesson Ideas

LEVEL

JC1 H1/H2

TOPIC

Market Failure & Government Intervention

DESCRIPTION
Case Studies
Relevant extracts from the white paper are taken out for students to
OF
RESOURCES see how economic concepts that they have learnt in the topic of
market failure could be applied to real world context.

In joint collaboration with NIES GESL Group 27, Building Blocks.

Activity 1: Case Studies

Extract 1:
Approximately 3 billion plastic bags were used in Singapore in 2011, resulting in an average of
1.6 plastic bags used per person on a daily basis. Burning plastic waste results in the emission
of greenhouse gases such as Carbon Dioxide and Methane, and toxic compounds such as
Nitrogen Oxides, Sulphur Oxides, Hydrogen Fluoride and Hydrogen Chloride. Incinerating
plastic waste also requires an energy input of 252 megajoules per tonne of waste. In the
Singapore context,anecdotal evidence suggests that major retail chains may pay as little as less
than one cent per plastic bag procured and distributed.
Source: Singapore Environment Council
1.
(i) Using evidences from the white paper and other relevant sources, list down what are the

marginal private cost,

marginal private benefit
marginal external benefit
marginal external cost
marginal social cost
marginal social benefit

in the consumption of plastic bag.

2. Explain why the consumption of plastic bag is considered negative externality.
3. Explain whether there is a role of government intervention in both the production and
consumption of plastic bag.

In joint collaboration with NIES GESL Group 27, Building Blocks.

Possible Answers:
Yes.
Argument: There is market failure in both production and consumption of plastic bag due to the
presence of negative externalities. As a result, there is a welfare loss to the society since
allocative efficiency is not achieved. Thus, there is a role of government intervention to
maximise welfare by judging based on two criteria namely efficiency and equity.
No.
The Singapore government may not view plastic bag as demerit good since plastic bags could
be reused. Thus, the government may not feel the current production or consumption as socially
undesirable. Hence, it would be economically viable for the government to intervene.
4. Using evidences from the white paper, suggest what are the possible measures to tackle the
problem in the use of plastic bag as well as the economic impact of each measure.
Possible Answers:
Banning
Use of incentives: Charge 5 cents per plastic bags
Activity 2: Essay Question
The Singapore government should ban the use of plastic bags to help conserve the
environment. Discuss this statement.
Scaffolding Questions
1.
(i) With the aid of an appropriate graph, explain how the ban of plastic bag can be economically
justified?
(ii) What are the necessary assumptions for the ban of plastic bag to be economically justified?
2. Using evidences from extract B and other relevant sources that you have obtained, explain
the possible economic impact of banning the use of plastic bag in Singapore.

In joint collaboration with NIES GESL Group 27, Building Blocks.

Extract B: Should we ban plastic bags in Singapore using comparative studies done by
other countries?
A study by the National Centre for Policy Analysis in Washington DC compared the economic
performance of stores in Los Angeles that were subject to a plastic bag ban and those that were
not, and found that stores subject to a plastic bag ban reported a decline in sales of -3.3 per
cent, and a reduction in the number of individuals they employed by an average of 10.4 per
cent. Stores subject to the plastic bag ban in the abovementioned study also reported an
average reduction in procurement of plastic bags by up to as much as 91 per cent, but the
report argued that this would be offset by increased spending on reusable bags.
An Economic Impact Report on Checkout Bag Charges in San Francisco claims that legislation
to ban free plastic bags at the point of sale will "have a very slight positive impact on the
economy", with job creation, a fall in retail prices and higher profits for retailers predicted.
However, SEC felt that introducing these two solutions in Singapore would be ill-suited to our
local context wherein all household waste is packed in plastic bags prior to disposal, which
means plastic bags are to a certain degree, necessities in each household. Furthermore, we did
not want to introduce a solution that would impose an additional financial burden on low-income
households.
Source: Singapore Environment Council

4.
(i) Does banning plastic bags raise the issue of inequity? Why?
(ii) Is there any trade-off faced by the Singapore government if it chooses to ban the use of
plastic bags?